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Why Coherent Stock Exploded 20% Higher on Monday

In Business
June 03, 2024

Laser maker Coherent (NYSE: COHR) saw its stock run up 19.5% through 11:45 a.m. ET Monday after the company announced it has poached Jim Anderson, CEO of Lattice Semiconductor, to become its own new CEO. Conversely, Lattice shares are down 15% on the news.

Lattice announced simultaneously that it has elevated Chief Marketing Officer Esam Elashmawi to become its interim CEO as it begins its search for a permanent replacement.

Who is Jim Anderson — and why does everyone want him?

Lattice stock is down significantly from its recent highs hit in March — which may not seem like high praise, or a great reason for Coherent to be poaching the company’s CEO. According to data from S&P Global Market Intelligence, however, Anderson has served as CEO of Lattice since Sept. 4, 2018. And over this longer time span it’s worth noting that Lattice shares have roughly octupled in value versus a gain in the S&P 500 of only 100%.

So despite its recent decline, under Anderson’s leadership, the stock’s still produced 8x better performance than the average stock on the market.

LSCC Total Return Level Chart

LSCC Total Return Level Chart

This, in a nutshell, may be why Coherent investors are so enthused about today’s news — and why Lattice shareholders are so upset to be losing Anderson’s leadership.

Does a new CEO make Coherent stock a buy?

Coherent can certainly use the help.

While the company’s stock has performed well of late, up 51% over the past 52 weeks, Coherent carries a significant debt load ($3.4 billion net of cash), and is not profitable. Coherent is generating decent free cash flow, about $225 million over the past year. Still, at a valuation of nearly 39 times trailing free cash flow and with a growth rate estimated in the low teens, it’s not at all a cheap stock.

Anderson’s first task as head of Coherent, I suspect, will be to juice that growth rate a bit, and help Coherent grow into its valuation.

Should you invest $1,000 in Coherent right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Coherent. The Motley Fool has a disclosure policy.

Why Coherent Stock Exploded 20% Higher on Monday was originally published by The Motley Fool

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